Watts v. Farmers Insurance Exchange

United States District Court, N.D. Alabama, Eastern Division

April 27, 2018

RODNEY WATTS, personal representative of the estate of LEIAH WATTS; C.W., by and through his father and next best friend, RODNEY WATTS; J.W., by and through his father and next best friend RODNEY WATTS; CURTIS WATTS, personal representative of the estate of EVELYN WATTS; BARRY MCBURNETT, personal representative of the estates of FAYE HOWARD and MARY ADAIR; RENEE STONE, individually and as mother and next best friend of V.S.; and TAMMY MCBURNETT, individually, Plaintiffs,v.FARMERS INSURANCE EXCHANGE; FARMERS GROUP, INC.; MID-CENTURY INSURANCE CO.; and Fictitious Parties 1, 2, 3, and 4, Defendants.

Plaintiffs
bring this case against Defendants Farmers Insurance Exchange
(the “Exchange”), Farmers Group Inc. (the
“Group”), and Mid-Century Insurance Co.
(“Mid-Century”) (collectively the
“Defendants”) (Doc. 23). It was originally filed
in the Circuit Court of Talledega County, Alabama. (Doc. 1-1
at 15). It was subsequently removed to the Northern District
of Alabama on August 28, 2017. (Doc. 1). Following oral
argument on previously filed motions to dismiss, Watts filed
his Amended Complaint on November 30, 2017. (Doc. 23).

The
Defendants then filed two motions to dismiss and one motion
to strike on December 14, 2017. (Docs. 24, 25, 26). First,
the Defendants filed a Motion To Dismiss Watts's claims
based on fraud. (Doc. 24). Second, the Defendants filed a
Motion To Dismiss Watts's claims based on breach of
contract and bad faith. (Doc. 25). Third, the Defendants
filed a Motion To Strike one of the exhibits attached to the
Amended Complaint. (Doc. 26). The parties have responded
(Docs. 30, 31, 32) and replied (Docs. 34, 35, 36). The Court
held oral argument on these issues on October 18, 2017, and
on April 25, 2018. Accordingly, the motions are ripe for
review.

II.
Relevant Background

The
following relevant background is copied verbatim from the
Amended Complaint:

STATEMENT
OF FACTS; THE UNDERLYING ACCIDENT

16. On or about July 16, 2016, Leiah Watts was driving a 2014
Ford Expedition Truck on Alabama Highway 21 in Winterboro in
Talladega, County, Alabama. Traveling with her as passengers
were the following family members: M. Faye Howard, Mary
Adair, Evelyn Foshee Watts, Tammy McBurnett, Renee Stone,
[C.W.], [J.W.] and [V.S.].

17. In the afternoon, while the Watts family was traveling on
Alabama Highway 21 in Winterboro in Talladega County, Alabama
around 1:40 in the afternoon, the Expedition in which they
were riding was struck by a vehicle driven by Wiley Marsh
“Pete” Whitworth.

18. Wiley Mash “Pete” Whitworth was the “at
fault” driver in the accident; that is, Mr. Whitworth
was the sole cause of the accident. The Alabama Uniform
Traffic Crash Report, attached hereto as Exhibit B, states
that Mr. Whitworth's vehicle was the “primary
contributing unit.” See, Exh. B., p. 1. Mr.
Whitworth's liability insurance, State Farm, has offered
its policy limits in this case, tacitly recognizing that Mr.
Whitworth is at fault in the accident. See, Exh. C. In
addition, representatives of the Defendants have stated that,
with respect to the UM coverage at issue in this lawsuit,
this case is a policy limits case. See, Exh. D.

19. Liability in this case is, therefore not contested.

20. As a result of this accident, the plaintiffs and/or their
decedents suffered the following injuries:

f) Renee Stone suffered serious injuries to her collarbone
and arm as well as soft tissue injuries all over her body and
nerve damage;

g) [C.W.] suffered serious injuries including a broken arm
and lacerations to his head;

h) [V.S.] suffered serious psychological injuries as a result
of being within the zone of danger at the time of the
collision and watching the deaths and injuries of family
members that included her grandmother, aunts and mother;

i) [J.W.] suffered serious psychological injuries as a result
of being within the zone of danger at the time of the
collision and watching the deaths and injuries of family
members that included his grandmother, aunts and mother.

STATEMENT
OF FACTS: UNDERINSURED MOTORIST COVERAGE UNDER THE
FARMERS/MID-CENURY POLICY

21. At the time of the accident, Rodney Watts and Leiah Watts
had in full force and effect an automobile insurance policy
issued and underwritten by Mid-Century Insurance Company,
policy number 19292-84-84. The policy included UM/UIM
coverage and insured a total of five vehicles. The policy was
issued on June 18, 2016.

22. Under an intercompany insurance pooling agreement,
Farmer's Exchange agreed to assume 51.75% of all
premiums, risks and liabilities accrued by Mid-Century
Insurance Company, while Mid-Century Insurance Company
assumed 16% of all premiums, risks and liabilities accrued
under its policies, including the policy issued to Rodney and
Leiah Watts.

23. Upon information and belief, Farmer's Group, Inc.
provided all administrative services in reference to the
Watts' policy, including but not limited to the writing
of the insurance policy, collection of premiums and
evaluation of claims.

24. Rodney Watts purchased the automobile insurance policy
from Farmers' agent, Nicole Ponder, in Oxford, Alabama.
The purchase was done over the phone before the policy was
issued on June 16, 2018. Rodney Watts talked to the agent
about the policy. Rodney Watts told the agent that because
the Watts' owned the Expedition, which was one of the
vehicles he was getting insurance on, they often had a lot of
extended family members riding with them on family trips, and
he wanted to be sure they were protected in the event of an
accident.

25. The agent went over the amount of liability and collision
and other coverages and the terms of the policy that Rodney
Watts was purchasing. When the agent got to the UIM section
of the policy, she told Rodney Watts that he had five cars
insured and that he had UIM coverage for all five cars and
for all people in the vehicle. She assured him that all
persons riding in any of the insured vehicles, including the
Expedition, would have UM coverage up to $150, 000 per person
in the event of an accident.

26. When Rodney Watts received the policy, he read the
policy, including endorsements. Based upon his attempt to
read the policy and the wording of the policy written by
Farmers Group, Inc. employees for Mid-Century Insurance
Company, it looked like what the agent told him was the
truth.

27. In
the Alabama endorsement to the policy that sets forth the
applicable uninsured motorist limits, the policy explains the
following:

(1) The limit of liability for Uninsured Motorist coverage
stated in the Declarations for each person for the occupied
insured car, plus the sum of the highest limits of liability
for Uninsured Motorists coverage stated in the Declarations
for each person applicable to any other insured car on the
policy, up to a maximum of two additional limits, is our
maximum limit of liability for all damages.

While
the policy does list a maximum limit of liability per
accident in the amount of $100, 000 plus two additional
coverages for a total of $300, 000, the policy also explains
that that maximum limit is “subject to the limit for
each person” which means the $150, 000 per injured
person limit trumps the maximum liability language.

28. The Alabama Uninsured Motorist Statute also provides that
an insurance company may only legally restrict stacking under
a single policy covering multiple vehicles to two coverages
per injured person. § 32-7-23(c), Code of Alabama
(1975).

29. After the terrible accident on July 16, 2016, Rodney
Watts was told for the first time that he only had coverage
for three vehicles for everyone in the vehicle rather than
five and that the Defendants refused to pay $150, 000 per
death or injury but rather insisted that the most they owed
for all of the deaths and injuries in the accident combined
was $300.000.00.

30. Had Rodney Watts known that the Defendants would only pay
on three coverages, he would have obtained different
insurance coverages in different amounts.

31. The deaths and injuries listed above were caused by an
underinsured motorist as that term is defined in §
32-7-23(b)(4), Code of Alabama (1975). Accordingly, each
person injured, or each estate of an individual killed in the
accident is entitled to receive up to $150, 000 under the
Farmers Insurance automobile policy. By unlawfully
restricting the amount offered to the injured individuals and
the decedents' estates to a total of ...

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